Breaking down the balance sheet

The Weekly Bloom; insights, news, and updates from bloom venture partners

Happy Friday founders and friends,

We’ve had another action-packed week so let’s get right into it…. 🚀🚀

Breaking down the balance sheet (NWC edition)

“Net Working capital is a term more frequently heard than understood."

- Every deal team on planet earth

If you have been part of any M&A deal you understand the tedious task of calculating and negotiating the dollar value of net working capital (NWC). It’s important to understand its significance and impact as failing to do so can leave you closing the deal with less 💰💰 to run the business.

At a high level; NWC (current assets - current liabilities) may seem very straightforward, but what makes calculating this figure so complicated for selling a business are the various line items that impact it and both parties’ interpretation of these items.

In a recent blog post, Matthew Hinson did a great job of breaking down its complexity 👇

Source: Calculating Working Capital

The intricacy of NWC makes it the most tedious and complicated part of closing any deal, let alone a huge pain for both parties.

TLDR; Whether you are an investor, operator, or founder, understanding the dynamics of NWC may not be critical now but most likely will be some time down the road.

Make sure to check out the following reads for a NWC deep dive:

📚 Importance of NWC in M&A

📚 Working Capital: How to Define (and Understand) It in Transactions vs. Operations

📚 Payment and Purchase Price Adjustment in M&A Deals

P.S. If you are enjoying our bit-sized insights make sure to subscribe 👇👇

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Favorites from the Ecosystem

Investors👇…..

Jay Vasantharajah @jayvasdigital

Maybe an obvious take but: At a certain point in size/scale, fund management firms shift from an investing business to an asset-gathering business. The focus becomes more on management fees (and AUM growth) and less on carry (and absolute returns).

Steve Ressler @steveressler

In SaaS businesses the lowest hanging fruit to increasing ARR is to increase the net retention rate. Here are 5 standard moves to increase revenue from existing customers. A quick thread 🧵

Founders👇……

Andrew Gazdecki @agazdecki

Reading about startups becoming unicorns & raising capital doesn’t really motivate most entrepreneurs because it’s not practical. However stories of profitable bootstrapped startups grinding it out do because it makes you believe that you can do it too.

Vivek Sodera @vsodera

1/ Founders: If you ≠ CEO/CTO, especially impt to put company’s needs over your own. No room for ego. If you don’t specialize (e.g. product) & instead stay a generalist, be prepared to take functions from 0 -> 1, hire someone WAY better than you, & give up control. Examples👇🏼

Operators👇…..

Max Weber @webermaximilian

A few things I learned about SaaS pricing Thread 👇

Hrishikesh Pardeshi @hrishiptweets

Marketing your startup doesn't have to be expensive! My startup makes $2 million in revenue without spending $$$ on paid ads. If you're on a $0 marketing budget, here are 8 things you can do with links to my threads on how exactly to do it 👇

Anyone looking for a laugh👇…..

Alex Cohen @anothercohen

Excuse me, but I would never lie on the internet. I met @JeffBezos this weekend and he is now taking me to space. Just wait

news18.comLinkedIn User Wrote a Fake Post About Meeting Jeff Bezos. The Internet Fell For ItAlexandar shared a tweet thread on Sunday where he shared a good laugh over the remarks and the comments he received on LinkedIn.

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What We’re Reading and Listening To…

📚 Maximising the value of private equity portfolio companies

📚 Private Equity Firms Are Cutting Out Banks and Funding LBOs Themselves

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News from the Industry: deals, deals, and more deals 💰

Clearlake Capital to buy Cornerstone OnDemand Inc., a human resources management software company

Blackstone has entered into a definitive agreement to acquire a majority stake in ed-tech platform Simplilearn.

Vista Equity is considering portfolio company, Tibco, for $7 Billion

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About Bloom Venture Partners

Bloom Venture Partners is a lower mid-market software-focused private equity firm, leveraging deep operational and commercial experience to create enduring market value for the benefit of our investors, founders, and their companies.

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Join Bloom VP’s Investor Community 🚀🚀

Are you an accredited investor interested in joining our investor base of HNW, Family Offices, and investment firms? Complete our contact form and a team member will be in touch. We are aggressively seeking opportunities to acquire underperforming B2B Software and Service businesses between $3M - $6M Revenue that meet our investment criteria.

"I have really enjoyed investing with Bloom Venture Partners. Working with Bloom has been very impactful for me and my family, and I will continue to invest with Bloom for as long as I have the opportunity."- Bloom Investor

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End Note

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